Emotional traders

There are many attitudes towards. People may vary their behaviours towards risk according to probabilities of states, potential losses and gains, (relevant and irrelevant) experiences, and information. Irrational behaviours are those decisions made based on irrelevant experiences and under poorly informed condition. However, at most of the time, people are always under such condition, because of countless existing constraints. Therefore, no one is a pure sophisticated investor (trader) in the market, and no one is a pure noise trader either; everyone is in-between noise trader and sophisticated trader.

Noise trader is not necessarily an emotional trader, as noise traders can just process their activities based on their incoming information without any analysis. However, emotional traders must be noise traders. Their activities are affected by their emotions, and their emotions could be affected by their trading performances and or any other things (such as their relationships with other people). Such emotional traders are almost unpredictable. But luckily these are usually retail investors that are unlikely to have the power to affect the entire market. However, black swan theory tells nothing is impossible, such unexpected noise might just create significant impacts on the market.